Positive feedback trading: a review

Gregory Koutmos

Review of Behavioral Finance, 2014, vol. 6, issue 2, 155-162

Abstract: Purpose - – The literature on positive feedback trading has grown considerably in recent years. The purpose of this paper is to provide a review of the theoretical and empirical literature on positive feedback trading and especially the literature related to the Sentana and Wadhwani (1992) model. Design/methodology/approach - – This literature review covers theoretical and empirical work in this area and it points out shortcomings and potential extensions of the basic feedback model. Findings - – The evidence so far points in the direction of positive feedback trading being present in aggregate stock market indices, index futures, bond markets, foreign exchange markets and individual stocks. There are some important issues that require further investigation. For example, it is likely that feedback trading is a function of longer lags of past return. Likewise, asymmetric behavior during up and down markets appears to be the rule rather than the exception. More importantly, the models should allow for positive as well as negative feedback and be general enough to investigate feedback trading behavior in individual assets and not just the aggregate market. Research limitations/implications - – The discussion points out theoretical and empirical limitations and shortcomings of the extant literature. Originality/value - – This is the first paper to review positive feedback trading, implications, limitations and need for future research.

Keywords: Heterogeneous investors; Positive feedback trading; Index futures; Long memory (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:v:6:y:2014:i:2:p:155-162

DOI: 10.1108/RBF-08-2014-0043

Access Statistics for this article

Review of Behavioral Finance is currently edited by Professor Gulnur Muradoglu

More articles in Review of Behavioral Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().